Dell Earnings Narrowly Beat Expectations

Driven by strong government and portable computer sales, Dell Computer Corp. narrowly beat Wall Street expectations with profit of $429million in its fiscal third quarter, the company reported Thursday.

For the three months ended Oct.31, Dell earnings fell 36% to $429 million, or 16 cents a share, from $674 million, or 25 cents a share, a year earlier.

Analysts expected Dell to earn 15 cents a share, according to a survey by Thomson Financial/First Call.

The Round Rock, Texas-based company posted revenue of $7.5billion, down 10% from $8.3 billion a year ago.

The decline reflected the personal computer price war that the world’s No.1 computer maker has led.

“We knew they have sacrificed a little bit of profitability to gain market share,” said Steve Kleynhans, an analyst with Meta Group.

According to industry researcher International Data Corp., Dell had about 27% of U.S. market share during the third quarter, which continued to see personal computer sales decline industrywide about 14%.

“The company continues to execute well in a very difficult environment,” said Ashok Kumar, an analyst with U.S. Bancorp Piper Jaffray.

Chief Executive Michael Dell said the company would continue to seek market share in the fourth quarter. Increased sales should spark a slight revenue increase in the quarter, Dell said, adding he anticipates earnings of 16 cents a share.

Thomson Financial/First Call analysts also predict earnings of 16cents a share in the fourth quarter.

“The industry as a whole will see a bit of an upturn [in the fourth quarter] because last Christmas was so bad,” Kleynhans said. Dell has always been stronger in its corporate business than consumer business, he said.

Dell hopes for improved consumer sales with products such as the new $599 SmartStep PC, which comes with one basic configuration instead of many.

The third quarter is typically a government-driven quarter for Dell, which replaced 10,000 computer systems in the two days after the Sept. 11 terrorist attacks on the World Trade Center and Pentagon.

“The government business was very strong for the quarter and grew 18% quarter-over-quarter,” said Kevin Rollins, Dell’s chief operating officer.

Dell has said it was not hurt financially by the attacks because aggressive supply chain management allowed Dell to operate with little interruption when air transportation was halted.

Shares of Dell rose 23 cents to close at $27.69 in Nasdaq trading.